Renewable Energy Investment
Global energy demand continues to climb year after year. Total global energy consumption is predicted to increase by approximately 50% by 2050, driven by expanding economies and developing countries. Simultaneously, scientists are raising concerns about rising temperatures due to carbon dioxide and other greenhouse gases.
With temperatures expected to rise by more than two degrees Celsius, many countries are looking for ways to replace fossil fuels with renewable energy sources. This opens up a market for investors that want to earn from green energy investments.
Green Energy Investments: An Overview
Green energy is any technology that can substitute renewable energy sources for fossil fuels, such as solar, wind, or hydroelectric power. It can also refer to auxiliary technologies that will be crucial in the shift to green energy. Improved battery technologies, for example, can aid in the transition to electric vehicles in transportation networks, and smart grids can help cut total usage.
According to Bloomberg New Energy Finance, global investment in transitional technologies is expected to reach $755 billion by 2021. Investment in transitional energy will need to reach above $2 trillion between 2022 and 2025, and $4.1 trillion between 2026 and 2030, to stay on schedule to reduce net carbon emissions to zero.
Thanks to new solar and wind power installations, investment in renewable energy projects reached new highs in 2021. BloombergNEF estimates that solar and wind facilities will require an average of $1.5 trillion per year between 2026 and 2030 to achieve net-zero carbon emissions by 2050.
Climate investments increased to new highs in emerging nations, with the Asia-Pacific region leading the way with $368 billion. However, such investments will need to increase in the next decades. To achieve net-zero carbon emissions by 2050, the global investment will have to quadruple in the next years.
Green Energy Investment Types
Green energy prospects can be profitable in a variety of ways. The most straightforward method is to identify individual enterprises that rely on the development of alternative energy technology. Individual company research, on the other hand, can take time, and not all such equities are publicly traded. Finding a mutual fund or index fund with a big basket of green energy equities may be a simpler option.
Clean Energy Investment Trusts
"Clean energy" is a broad term that encompasses anything from renewables to alternative transportation. Clean energy funds, while not everyone's definition of green energy, provide a handy option to invest in a diverse portfolio of energy companies.
The Invesco WilderHill Clean Energy ETF is the most convenient way to participate (PBW). As of March 2022, the $270 million ETF follows 124 distinct "green" energy companies, including industry heavyweights like Canadian Solar Inc. (CSIQ) and First Solar, Inc. (FSLR).
PBW has yet to deliver on its promise, with a 10-year return of only 11.34 percent. The fund, on the other hand, is a long-term investment that could see better returns in the future.
ETFs for solar and wind power
Investors searching for more pure renewable options should check into some of the solar and wind energy ETFs. The Invesco Solar ETF and the First Trust ISE Global Wind Energy ETF make it simple to invest in their respective areas.
Aside from the cute tickers, both the TAN and FAN have been huge winners in recent years as both solar and wind power companies have returned to profitability. Over the three years ending in December 2021, the TAN solar ETF gained 61 percent, while the FAN solar ETF gained roughly 23 percent.
Renewable energy investments might drive fund prices higher over the next few decades with the sun shining and the wind at their backs.
Investing in Hydroelectricity
In the coming years, hydropower is likely to be the most popular renewable energy source. It is now the most frequently used renewable energy source, accounting for around 17% of global electricity generation.
With the acquisition of Alstom SA in France in 2015, General Electric Co. (GE) re-entered the hydropower market. Alstom is one of the world's top manufacturers of hydropower turbines. GE turbines and generators account for almost a quarter of the world's installed capacity.
Siemens AG, not to be outdone, continues to focus on small-scale hydroelectric installations. Both GE and Siemens have the potential to be major players in renewable energy expansion.
How Do You Make Green Energy Investments?
Finding a mutual fund or index fund that invests in a diverse portfolio of renewable energy securities is the simplest method to invest in green energy. There are a variety of these funds, each with a distinct strategy or goal index for renewable energy. Investors can also research the stocks of particular green energy firms, albeit this is a more time-consuming approach.
Which countries put the most money into renewable energy?
China was the largest investor in renewable energy in the decade from 2010 to 2019, according to a UN Environment Program research. China invested $758 billion in non-hydroelectric renewable energy, whereas the US spent $356 billion and Japan spent $202 billion.
What Is the Best Green Energy Source?
There is no single answer to this question because renewable energy output is highly dependent on local factors such as weather. Solar and wind power have witnessed dramatic increases in electrical output, and they are currently cheaper than fossil fuels in many areas. For large-scale production, hydroelectric, geothermal, and nuclear power are more reliable, but each has its own set of environmental issues.
The current report by Bloomberg New Energy Finance3 demonstrates how far renewables can meet our generation's needs. Given the expected spending frenzy in the sector, investors that opt to "go green" may see their holdings rise in tandem with energy demand.